First Posted: 11/29/2013 2:24:09 PM | Last Updated: 11/29/2013 2:26:43 PM
List of Common Things Your Business Can Write Off on Taxes
by Jennifer Alyson, Demand Media
You have to spend money to make money, but federal tax laws can take some of the bite out of your company's expenses. Common business write-offs can cut taxable income and slash what your company owes on April 15.
In general, expenses your business writes off typically have to be routine in your industry and necessary to the operation. Also, keep thorough records to prove spending went into your business, and consult an accountant for details on exceptions that might apply in your case.
You can deduct virtually any office equipment or supplies your business needs. Printers, copiers, paper, desks, software, filing cabinets -- all are fair game for write-offs. For big-ticket items such as furniture, you can choose how you deduct. Some businesses write off the entire purchase price in the year they bought the goods.
Others depreciate equipment over five years, or furniture over seven years. For software, the depreciation period is three years. For equipment and furniture put to use in 2012 and 2013, companies can deduct as much as $500,000 in costs. That write-off is scheduled to drop to $25,000 in 2014. Businesses that make capital investments with credit enjoy an extra write-off: They can deduct interest and carrying charges.
Many of the costs of doing business are deductible. Companies can exempt fees they pay to attorneys, accountants and consultants, as long as their services relate to the current year’s business.
They can also write off promotional investments such as business cards, phone-book ads and sponsorships. Nor do companies have to pay taxes on income that went to casualty and theft coverage, liability or malpractice insurance, business-interruption plans or coverage for losses from unpaid debts.
What’s more, those bad debts are write-offs, too, as long as the product sold was a tangible good and not a service. Some taxes, including employment taxes and business real estate levies, are deductible as well.
Related Reading: What Can I Write Off on My Taxes as a Small Business?
For most companies, labor is the biggest expense. However, several write-offs can ease those costs. Companies can deduct employee compensation, including wages, gifts, bonuses and benefits such as health insurance and vacation pay. Businesses that help employees with adoption assistance and group term life insurance also receive write-offs for those services.
Plus, federal law grants tax advantages to set aside money for workers’ retirement plans. Through a Simplified Employee Pension plan or a Savings Incentive Match Plan for Employees, companies can deduct contributions for employees and owners. They can even deduct plan administration fees if contributions don’t cover the charges.
After labor, rent may be most companies’ next major expense. Businesses can write off rent for the current year as long as owners don’t have and won’t receive equity in or title to the office space. For home-based businesses, there’s a real estate write-off, too.
To qualify, the space must be used exclusively for business. If your dining room doubles as home office and family eating spot, it won’t count. However, if you do have dedicated business space, it doesn’t need to be an entire room.
A corner of the den will suffice. To see how much you can write off, measure the workspace and divide it by the square footage of your home. The percentage you come up with is the share of housing payment and utility costs you can deduct.
Don’t forget the host of smaller, lesser-known expenses that companies can deduct. Books, audiotapes and videotapes that burnish business skills are deductible, as are bank service charges. Companies that join chambers of commerce and attend trade shows can write off their dues and registration fees. The cost of serving up coffee and other beverage services for employees is deductible. Other expenses companies can write off include business licenses and regulatory costs, outplacement services for employees and penalties or fines for late performance or nonperformance of a contract.